EnQuest has made a small purchase in the UK North sea. Questor keeps a buy.

This week’s acquisition by EnQuest of an 8pc stake in the Alba oilfield in the North Sea is unlikely to change analysts’ forecasts. However, the deal has added reserves to the oil explorer’s books and highlights what the company does best: squeezing the last bit of oil out of mature fields.

EnQuest was spun out of Lundin and Petrofac and it is the largest independent oil group in the UK North Sea. However, the company has recently diversified, buying small packages of assets in the Norwegian North Sea and Malaysia.

The company has specialist engineering skills that can extend the life of depleted fields. Its strategy involves buying oil fields that are already producing and leveraging its technical expertise to boost production, as well as carrying out its own exploration.

The Alba stake was bought from private US company CIECO Energy for £18.75m in cash. There is also an extra payment of £500,000 should certain milestones be reached.

The purchase brings “proven and probable” oil reserves of 5.9m barrels into the group’s portfolio. This means that EnQuest paid about $5.20 for each barrel of oil in the ground, which appears to be good value.

According to an analysis by broker Jefferies, recent North Sea oil transactions have been at the $13 a barrel level, “with developed, producing fields like Alba often commanding even higher valuations”.

The operator of the field is US oil giant Chevron, which holds a 23.4pc stake in Alba, and EnQuest’s purchase should add about 7pc to its production this year.

The Alba field contains about 1bn barrels of oil in total and has so far produced 400m barrels. The oil produced is heavy oil, which trades at a discount to Brent crude as it requires more processing and its viscosity means it can be difficult to transport through pipes without adding other chemicals.

However, oil prices are historically high and look like they will remain buoyant for some time. This week, energy information group Platts revealed that China’s oil demand rose 7.7pc year-on-year in December to 10.58m barrels per day (bpd), the highest on record. The previous high was hit in November, when demand rose 9.3pc to 10.5m bpd.

EnQuest plans to increase production by 20pc each year between 2009 and 2014. It is on track to meet this aim.

The shares are trading on a 2013 earnings multiple of 9.7, falling to 7.6 in 2014, which does not seen too stretched. The company is not currently paying a dividend. EnQuest remains a buy for future production growth.